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Share capital and share capital upon establishment

At a glance: the initial contribution to a corporation

The most common form of corporation in Germany is the limited liability company (GmbH). In addition, the entrepreneurial society (UG) is enjoying increasing popularity. The following explanations on the capital contribution focus on the GmbH and the UG.

The establishment of a GmbH or UG is considered completed when the notarization has been carried out by the notary. Following the establishment of the company, a bank account must be set up, into which the shareholders pay the share capital. The percentage of the share capital that is allocated to a partner corresponds to his share of the capital. In total, the share capital of all shareholders corresponds to the share capital of the company.

In most cases, the capital contribution is brought into the company as a cash payment. However, there are also alternative ways in which the shareholders can make their capital contribution.

From the notarial certification of the establishment of the GmbH to the entry of the GmbH in the commercial register, a preliminary company is created, also known as a pre-GmbH or GmbH in formation (GmbH i.G.). During this period, the partners are also liable with their private assets, which is why all partners should pay in their capital contribution quickly. Contributions that are not made in the form of a cash payment as a capital contribution should have been considered and valued accordingly in advance.

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The initial situation: found a GmbH or UG

Before founding a company, founders should ask themselves what legal form the future company should have. When it comes to the issue of share capital, only corporations are relevant. In most cases, the choice is concentrated on the GmbH or the UG. The corporation in the form of a stock corporation (AG) is less relevant for founders, as the requirements for the share capital and the formal requirements for the establishment and the further course of business are much higher.

The GmbH as a corporation is a legal person under private law under German law. At least one person (partner) is required for the establishment. Any number of other persons can be shareholders, who in addition to natural persons can also be legal persons, e.g. other corporations.

In the case of a GmbH, the minimum share capital is 25,000 euros. The nominal amount of each business share must be in full euros. A partner can take over several shares in the establishment of the company. The sum of the nominal amounts of all shares must match the share capital.

When founding a GmbH in cash, the shareholders must pay in at least a quarter of their share (the capital contribution). In total, the paid-in shares of all shareholders must also reach at least half of the minimum share capital (12,500 euros). If contributions in kind are made in the GmbH, this is only possible in the full amount of the respective original contribution.

Special features of the UG share capital

In contrast to the GmbH, the minimum share capital as well as the minimum amount of a single share is 1 euro in a UG. In addition, no contributions in kind can be made in a UG, which could be the case, for example, with foundations in which patents or trademark rights are to be brought in.

In the external presentation, the addition "UG" in the company name immediately shows that it is a limited liability company. The lower share capital often complicates reputation and creditworthiness.

A UG is usually recommended if the founder is a sole proprietorship with little equity who wants to limit his liability risks with low start-up costs. Theoretically, a UG can be founded with a share capital of 1 Euro. It should be noted, however, that with a UG part of the profits must be saved until an equity of 25,000 euros is reached. Then the UG is automatically converted into a GmbH and additional costs arise.

Are you unsure which legal form to choose for your self-employment? Then you will find a comparison of the most important legal forms in our overview.

Overview of legal forms

The share capital vs. share capital

The capital contribution is the share of the capital stock that each individual shareholder of the GmbH brings into the company. It also expresses the share that an individual shareholder acquires in the total capital of the GmbH. This means that the individual shareholder participates in the company's share capital in the amount of his or her share. In accordance with his percentage of the company, his voting rights are also distributed at the shareholders' meeting.

The amount of the respective share in the share capital is set out in the articles of association. If the distribution changes, the partnership agreement must be adjusted accordingly. For example, the passage in the articles of association of a GmbH can read as follows:

Section 3, Paragraph (1) The company's share capital is EUR 25,500 (in words twenty-five thousand five hundred euros). It is divided into 25,500 shares with a nominal value of EUR 1.00 each, which are numbered consecutively in the list of shareholders with Arabic numerals in ascending order, starting with 1.

Section 3, Paragraph (2) The capital contributions are to be paid in cash. Half of the capital contribution is due immediately, the rest as requested by the management based on a resolution of the shareholders' meeting.

Section 3, Paragraph (3) The shares issued on the company's share capital are held as follows:

  • (a) Mr. Max Mustermann, shares with the serial numbers 1 to 8,500 (corresponds to a participation in the company's share capital of EUR 8,500);
  • (b) Ms. Michaela Schmidt, shares with the serial numbers 8.501 to 17,000 (corresponds to a participation in the company's share capital of EUR 8,500);
  • (c) Mr. Sven Müller, shares with the serial numbers 17.001 to 25.500 (corresponds to a participation in the company's share capital of EUR 8,500);

As in the example mentioned, the capital contribution can be made as a cash contribution. A contribution in kind or a mixed cash / non-cash contribution are also possible.

In the case of a one-person GmbH or one-person UG, the share capital of the sole shareholder is of course identical to the share capital of the company.

Here we have put together in 10 steps what you absolutely have to pay attention to when founding your company.

10 steps to founding

The four steps up to the payment of the capital contribution

After the founders have decided on the right type of company, the next steps up to the final payment of the capital contribution must be carried out quickly and in the correct order.

  • 1st step: Foundation documents and notary appointment
  • Step 2: open the bank account
  • 3rd step: Pay in the capital
  • 4th step: Register the company with the commercial register

Step 1: Foundation documents and notary appointment

A partnership agreement is mandatory for the establishment of a corporation such as the GmbH and the UG. It regulates the essential rights and obligations of the shareholders as well as their share in the company's share capital (their share).

The basic requirements for the partnership agreement of a GmbH are regulated in the GmbH Act. In addition, there is also scope for individual regulations. The partnership agreement must be notarized and signed by all shareholders.

As a sub-form of the GmbH, the UG behaves legally in accordance with the GmbH Act. The main rights and obligations of the partners are also recorded in the partnership agreement of the UG; this must also be notarized and signed by the partners.

When establishing a GmbH or UG, the founders can also use a sample protocol that is prescribed by the legislature and that replaces the partnership agreement. However, this must then not be adjusted, which is why its use is only recommended in very few cases.

As soon as several shareholders set up a corporation, investors may still be on board or the capital contributions are not made as a cash contribution, it is advisable to seek legal assistance in order to clearly regulate the relationships between the shareholders and their rights and obligations right from the start.

Step 2: Open a bank account

If the partnership agreement is notarized, a bank account must be opened for the company. In order to speed up the process, the founders should decide on a bank in advance and have requested an appointment in advance. This also reduces the described risk of the private liability of the GmbH i.G. up to the entry in the commercial register.

All notarized founding documents must be brought with you to open the bank account. In addition, the shareholders must be able to identify themselves.

It should be noted that additional days may pass between the appointment at the bank and the final opening of the bank account.

Step 3a: Pay the capital into the GmbH

Once the bank account has been opened, the shareholders must pay in their capital contribution. The sum of all capital contributions results in the company's capital stock. The minimum capital of a GmbH is 25,000 euros. In the case of cash payments, the company is only entered when at least half of the agreed shares of the shareholders (at 25,000 euros, i.e. at least 12,500 euros) has been paid in. Each partner must pay in at least a quarter (25%) of their capital contribution.

Practical example:

A GmbH is founded by three shareholders. The company's share capital is 25,000 euros. The shareholders have decided to make a cash payment of the capital contribution. Shareholder A holds 50% of the shares, shareholders B and C each hold 25%. This means that partner A must pay in EUR 12,500, shareholders B and C each have to pay EUR 6,250.

In order for the company to be founded, at least EUR 12,500 must be paid into the agreed shares of the shareholders, but each shareholder must contribute at least 25% of his share. It is therefore not enough if partner A transfers all of the 12,500 euros due, but partners B and C do not make any payment of the capital contribution.

If, on the other hand, shareholder B pays EUR 1,562.50 (25% of EUR 6,250), shareholder C EUR 3,750 (60% of EUR 6,250) and shareholder A EUR 7,500 (60% of EUR 12,500), the paid-in share capital reaches EUR 12,812.50, the GmbH can be founded.

If the share capital has not been paid in directly in full, the company has a claim against the shareholders who have not yet made their share capital. The law does not regulate up to when the remaining remaining contributions have to be paid in with a GmbH, which is why a corresponding passage in the partnership agreement is recommended, e.g. by when the payment of all shares must be made.

If individual shareholders do not pay in all shares immediately, they are also liable with their outstanding shares.

When establishing a so-called "one-man GmbH", i.e. there is only one partner who holds 100 percent of the shares, the partner must order a security for the part of his capital contribution that has not been paid in.

If it is not a pure cash formation, but a non-cash formation or a mixed cash / non-cash formation, special regulations must be observed, which we explain further below

Step 3b: Pay the capital into the UG

The regulation of the limited liability company is comparatively simple. The share capital and thus also the share capital of each partner can only be raised in cash and must be brought in immediately in full.

Step 4: Registration with the commercial register

Once the partnership agreement has been notarized, the bank account has been opened and the share capital has been paid in, the deposit slip is sent to the notary. Then the notary can apply for the company to be entered at the competent registry court.

After the company has been entered in the commercial register, the previous GmbH i.G. becomes a fully-fledged GmbH, the GmbH partners are then only liable with their capital contribution.

Alternatives to the capital contribution as a cash contribution

For some founders, the question certainly arises as to whether the capital contribution must be made as a cash contribution. The regulations for the UG and GmbH differ. The regulation at the UG is quite simple, because here only a cash payment in the full amount of the respective initial contribution is possible. In the case of a GmbH, the most common form of capital contribution is also a cash payment into the company's account. In addition, there are various options for a contribution in kind or a mixed cash / non-cash contribution.

If the capital contribution is made in the form of a contribution in kind, the full amount must be paid immediately, while in the case of a cash contribution each shareholder only has to contribute 25% of his capital contribution until at least 50% or EUR 12,500 of the minimum capital stock of the GmbH is reached. In order to bring a contribution in kind to the share capital, this must be explicitly regulated in the company's articles of association. All contributions in kind must be named individually and recorded with their amount. Common contributions in kind are, for example:

It is important that the value of the individual contributions in kind is determined in a comprehensible manner in advance, in order to exclude possible potential for conflict between the founders from the outset. Here it is often advisable to use an independent expert. However, the amount stipulated in the articles of association is always decisive

Conclusion on the initial contribution at the establishment

When founding a GmbH or UG, certain minimum requirements for the share capital and the shares that apply to the individual shareholders must be observed. While the minimum share capital for a GmbH is 25,000 euros, for a UG, at least in theory, it is only 1 euros. However, the profits of the UG cannot be distributed in full, as part of the profits must be saved until an equity of 25,000 euros is reached. Then the UG has to be converted into a GmbH, which entails additional costs.

While at the GmbH with cash contributions at least half of the minimum share capital must be paid in at the establishment, at the UG the agreed minimum share capital has to be raised immediately. If contributions in kind are made in the GmbH, these must be assessed in advance and recorded with their exact amount in the company's articles of association. Contributions in kind are to be made in full immediately.

Founders should also note that from the time the GmbH is established by a notary until the company is entered in the commercial register, a previous company (GmbH i.G.) is created in which all shareholders are also liable with their private assets. Therefore, capital contributions should be made quickly.

Author: Für-Gründer.de editors

As editor-in-chief, René Klein has been responsible for the content of the portal and all publications by Für-Gründer.de for over 10 years. He is a regular interlocutor in other media and writes numerous external specialist articles on start-up topics. Before his time as editor-in-chief and co-founder of Für-Gründer.de, he advised listed companies in the field of financial market communication.